Fighting AZ’s Medicaid Expansion Tax

In 2013, the state passed a Medicaid expansion program that levies an unconstitutional provider tax on Arizona taxpayers, to fund the program. Under Prop. 108 of the state constitution, bills that enact new taxes or increase taxes must receive two-thirds majority vote in both houses of the legislature. The state’s Medicaid expansion bill fell well short of this threshold. The Goldwater Institute is representing legislators whose votes against Medicaid expansion should have defeated the bill but were effectively nullified when the expansion bill became law without the constitutionally required two-thirds majority approval guaranteed by Prop 108, their constituents who were denied representation when their senators’ and representatives’ votes were not counted, and Arizona taxpayers who have been deprived of the protection of constitutional separation of powers.

In 2013, Arizona passed a Medicaid expansion program that levies an unconstitutional provider tax on state taxpayers, to fund the program.

Supporters of Medicaid expansion propose to fund Arizona’s share of the massive new program by charging a “provider tax” to hospitals. But they encountered a roadblock: to shield themselves from one of the most widely abused government powers, Arizonans in 1992 overwhelmingly enacted a constitutional requirement that 2/3 of the legislature approve any tax increase. Expansion advocates were unable to garner that level of legislative support. So instead of complying with the constitution, they ceded to an appointed administrator the power to levy taxes, a job the state’s constitution specifically entrusts to the people’s representatives. Even worse, this administrator has full discretion to set the amount of the tax and to decide who has to pay and who will be exempt. Attempting to evade the constitution in this way ensures that the true beneficiaries of Arizona’s Medicaid expansion are not the people, but the politically connected hospitals who lobbied to line their pockets.

Arizona was built on the principles of self-government. To protect the people from an unaccountable bureaucracy, the Arizona Constitution reserves the lawmaking power to elected legislators, whose decisions are subject to review by the other branches. Ignoring restrictions on the taxing power and yielding control to independent officials eviscerates these checks and balances, inviting uncertainty and paving the way for special interest groups to hijack the lawmaking process.

Arizona has a rich history of sheltering its citizens from federal overreach. Unfortunately, some state lawmakers have sacrificed that tradition—and the state constitution—to stick Arizonans with an unconstitutional tax. The Goldwater Institute is representing legislators whose votes against Medicaid expansion should have defeated the bill but were effectively nullified when the expansion bill became law without the constitutionally required 2/3 approval, their constituents who were denied representation when their senators’ and representatives’ votes were not counted, and Arizona taxpayers who have been deprived of the protection of constitutional separation of powers.